SG’s high social inequality a result of elitist policies

Our Prime Minister has said:

In fact, if I can get another 10 billionaires to move to Singapore and set up their base here, my Gini coefficient will get worse but I think Singaporeans will be better off, because they will bring in business, bring in opportunities, open new doors and create new jobs, and I think that is the attitude with which we must approach this problem.

But in all honesty, I don’t feel any love or compassion from them. I have not had an inkling of visceral or intellectual contribution by them. In fact, no one has ever shown me the link between their existence in Singapore and the benefits for Singaporeans.

In fact, I will argue that the policies leading to our high GINI, also gave us:

  1. Crony Capitalism @ The Economist
  2. Most Expensive City @ The Economist
  3. Most hours worked @ 2287 hours/year
  4. Highly dissatisfied workers @ Randstad
  5. Worst Press Freedom in the developed world @ 150 ranking

In contrast, a snapshot of a society with a benign GINI is Sweden:

Concerning the public sphere, there is a strong sense of community and high levels of civic participation in Sweden, where 92% of people believe that they know someone they could rely on in time of need, slightly higher than the OECD average of 90%.

In general, Swedes are more satisfied with their lives than the OECD average, with 85% of people saying they have more positive experiences in an average day (feelings of rest, pride in accomplishment, enjoyment, etc) than negative ones (pain, worry, sadness, boredom, etc). This figure is higher than the OECD average of 80%. (OECD Better Life)

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Simple GINI in a table:

Column A is when all are equal. Everyone has the same income.

Column B is similar to the Scandinavian model. GINI @ 0.25

Column C is similar to the Singapore model. GINI @ 0.45

Column D: Economic growth with emphasis on across sectors innovation, leveling up our people, and higher taxes and stronger social benefits. GINI is closer to Scandinavian model.

Column E: Economic growth with status quo policies. With policies that concentrate income at the top 20% as represented by Ah Lian, the GINI will increase to Third World level.

Among the 34 OECD countries, only Chile and Mexico have a higher GINI than Singapore.

Economic growth

In his 1994 article, “The Myth of Asia’s Miracle”, Paul Krugman argued:

  1. All of Singapore’s growth [between 1966 and 1990] can be explained by increases in measured inputs. There is no sign at all of increased efficiency.
  2. In this sense, the growth of Lee Kuan Yew’s Singapore is an economic twin of the growth of Stalin’s Soviet Union growth achieved purely through mobilization of resources.
  3. Of course, Singapore today is far more prosperous than the U.S.S.R. ever was – even at its peak in the Brezhnev years – because Singapore is closer to, though still below, the efficiency of Western economies.
  4. The point, however, is that Singapore’s economy has always been relatively efficient; it just used to be starved of capital and educated workers.

The traditional factors of production are land, labor and capital. Our land is pretty fixed, so we have been priming capital and labor. And perhaps, as another indication of our lack of emphasis on human development and technology, is that the multifactor productivity growth averages just 0.33 of a percent over the last 7 years. Have we reached the end of our potential as suggested by Paul Krugman? Have the last decade of ‘over the potential’ growth masked structural problems which may implode subsequently?

Conclusion

Lets assume Paul Krugman is right, that given the traditional factors of production and our educational level, we have maxed out. And as we strive for greater growth, we can either do it through a painstaking development of innovation and productivity or primed-up labor supply and capital.

So, because we chose the path of least resistance, we attempted to drive growth by shifting the dynamics to the right of the graph (as above) and, by this action, income inequality widened, poor infrastructure planning was exposed and social cohesion was eroded.

Can we be innovative and grow while maintaining a GINI similar to the Nordic countries? They say no. They say the Nordic countries have natural resources. Norway has oil and gas, Finland and Sweden have forests, and Denmark has agricultural lands, none of their natural resources, however, can be compared to Singapore’s natural geographic location that make it among the top 3 busiest ports in the world. Which Nordic country has a world class resource so to speak?

And besides, you cannot accumulate natural resources. You can only manage and maintain them. But what the Nordic countries have done much better than Singapore is in human development and innovativeness. Their social compact made them a happier lot.

They say, well, the Nordic countries are homogenous. It makes you wonder whether they have ever read these famous quotes:

  1. ‘We few, we happy few, we band of brothers. For he today that sheds his blood with me shall be my brother..’
  2. “Who are my mother and my brothers?” And looking at those who were sitting around him in a circle, he said, “Here are my mother and my brothers! For whoever does the will of God is my brother and sister and mother.”

It is in their Social Darwinism and Eugenics philosophy that they cannot conceive that this motley crew of Singaporeans can be brothers. It is a commitment to Singapore, and Singapore’s commitment to us, that makes us ‘homogenous’.

The GINI effect is not a natural consequence of globalization or the ‘bell curve’ that LKY used to quote excessively; to place each person in an immutable position based on natural abilities. In a study by OECD, although globalization and technology do play a role in raising inequality, the difference in GINI coefficient between the countries is a matter of government policies.

Our high and socially corrosive GINI coefficient is a result of policies driven by a philosophy of elitism. It is wrong to view it as a trade-off between national income and social cohesion. It is their political philosophy of meritocracy and power that concentrate growth at the top end. The Nordic countries do present us with alternative models. The reason this is rejected has less to do with incompatibility and more to do with political control.

BK

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